Gov't approves P6-B 'subsidy' for LRT 1 Cavite extension

by Lenie Lectura, BusinessMirror

MANILA - The government has approved a P6-billion viability gap funding (VGF) for the Light Rail Transit (LRT) Line 1 Cavite Extension project, the country’s largest railway public-private partnership (PPP) project, the Department of Transportation and Communications (DOTC) announced.

In a bid bulletin issued on February 10, Jose Perpetuo Lotilla, chairman of the Bids and Awards Committee of the DOTC, said “pursuant to the Neda [National Economic and Development Authority] Board approval obtained on November 21, 2013, the LRT Line 1 Cavite Extension project has received approval for a VGF in the amount of approximately P6 billion.”

A VGF in a PPP project means the government would fund the gap and give the money to the concessionaire, Lotilla said, when sought for comment.

“VGF actually means subsidy. It means that standing alone and without external subsidy or funding assistance, the project is not viable as a purely commercial concern. That is why it’s called VGF. There is a financial gap, which is filled in by external funding because the project revenue is not enough,” added Lotilla, who is also the agency’s undersecretary for legal affairs.

The deadline for the submission of bids has been set for April 28. The bidders are DMCI Holdings Inc., Light
Rail Manila (LRM) Consortium, MTD Philippines Inc., SMC Infra Resources Inc., Globalvia Inversiones of Spain, Megawide Construction Corp. and Ecorail Services Inc.

The DOTC has set a second round of one-on-one meetings with the bidders starting with SMC and Globalvia on March 3; LRM and Megawide on March 4; MTD Philippines and DMCI on March 5; and Ecorail on March 6. Last month the DOTC said it was nearing the completion of the right-of-way (ROW) acquisition for the P64.9-billion LRT Line 1 Cavite Extension Project. It has so far completed 92.34 percent of the ROW acquisition requirement for the Baclaran-Dr. Santos segment; 69.2 percent of the Dr. Santos-Zapote segment; and 84.2 percent of the Zapote-Niog segment.